5 common mistakes to avoid when setting up your company in Switzerland

5 common mistakes to avoid when setting up your company in Switzerland

Setting up a company in Switzerland is a complex and time-consuming undertaking. If you are not familiar with the Swiss laws and regulations for setting up a company, you may make costly mistakes that can affect the viability and success of your business.

1. Mistake for lack of qualified advice

It is essential that you surround yourself from the outset with a qualified advisor, such as a lawyer, a Swiss fiduciary officer, a finance and accounting expert, or a financial advisor. These professionals can help you navigate the complexities of setting up a business, avoid common mistakes and ensure that your business is strong and sustainable.

If you do not seek advice from the outset, looking for the lowest incorporation prices, you may make costly mistakes, such as choosing the wrong legal form for your business, underestimating the costs of setting up and running a business, or ignoring legal requirements. 

These mistakes can cost you time, money and even the viability of your business.

For example, if you choose the wrong legal form for your business, you may end up with a structure that is not suitable for your long-term goals or that exposes you to unnecessary risks. If you underestimate the costs of setting up and running a business, you may run out of funds to continue your operations and have to close your business prematurely. If you ignore legal requirements, you risk financial and legal penalties.

By working with a qualified adviser from the outset, you can avoid these mistakes and minimise the risks associated with setting up a business in Switzerland. You can also benefit from advice and guidance on best practice in business management, risk management and tax planning, which can help ensure the long-term success of your business.

2. Legal structure error

The choice of legal structure is one of the most important decisions you will make when setting up your business in Switzerland. Choosing the wrong legal form can have significant consequences for the viability, costs, management and even succession of your business.

One of the risks of choosing the wrong legal structure is the unlimited personal liability of the owners or shareholders of the business. For example, if you choose a structure such as a sole proprietorship, you are responsible for all the debts and obligations of the business, which means that your personal assets can be seized in the event of bankruptcy or litigation.

In addition, the wrong choice of legal structure can also affect the management of your business. Some structures may have stricter governance rules, such as the mandatory appointment of an auditor or a board of directors, which can affect decision-making and slow down the responsiveness of your business.

Finally, choosing the wrong legal structure can also affect the succession of your business. Some legal structures are not suitable for passing on the business to the next generation, which can have important consequences for the continuity of your business.

In summary, the wrong choice of legal structure can have significant consequences for the viability, costs, management and succession of your business. Risks include unlimited personal liability, high set-up and management costs, less flexible governance and difficulties in transferring the business. It is therefore important to work with a qualified advisor to choose the most appropriate legal structure for your business.

3. Mistakes in drafting the company's purpose

The third common mistake in setting up a company in Switzerland is not adapting the corporate purpose in the articles of association to the intended activity. This can lead to refusals to open a bank account, obligations to take out specific insurance policies, and time-consuming and costly authorisations and licences to operate.

The business purpose describes the main activity of the company and should be specified in the articles of association. It is important to ensure that the objects clearly describe the intended activity of the business, as this may have an impact on the perception of banks and competent authorities.

For example, banks may refuse to open an account for the company because the stated purpose may be considered a high-risk activity.

Errors in the drafting of the business purpose may also lead to obligations to subscribe to specific insurance policies.

It is therefore essential to think carefully about the business purpose when setting up the company and to ensure that it is precise and appropriate to the intended activity. This will make it easier to open a bank account, avoid problems of authorisation and licensing, as well as specific insurance obligations which can be costly.

4. Miscommunication with the bank

The fourth common mistake in setting up a business in Switzerland is to think that opening a bank account is a mere formality, whereas banks have the right to refuse to open an account, especially if the client provides inaccurate or incomplete information when applying.

In Switzerland, there are two types of bank accounts that can be opened by a company: the consignment account and the commercial bank account. The consignment account is a blocked account where the company deposits the share capital, while the commercial bank account is used for the company's day-to-day transactions.

Swiss banks are subject to strict anti-money laundering and anti-terrorist financing rules, and therefore have to carry out a thorough check of the financial situation and background of customers before opening an account. In addition, if the bank considers the risk of the entrepreneurial activity to be high, it will refuse to open an account.

The bank will also refuse to open an account depending on the purpose of your company and if your company does not have enough economic substance in Switzerland or if the bank qualifies your company as a domiciliary company.

It is therefore important to provide accurate and complete information when applying for an account, in order to facilitate the account opening process and reduce the risk of refusal. It is also advisable to be accompanied by a professional to ensure that all the information provided is correct and appropriate to the company's situation.

5. Choice of the company's registered office, wrong domicile

The last common mistake when setting up a company in Switzerland is to make a wrong choice of the company's registered office or domicile. The choice of the registered office or domicile is important because it has important tax, administrative and legal consequences for the company.

The registered office of a company is the place where the actual management of the company is located, while the domiciliation is the place where the company is officially registered for administrative purposes. The choice of the company's registered office or place of business should be considered from the outset, as it may have important consequences for the taxes the company has to pay, the administrative rules it has to comply with and the relations it has to maintain with the competent authorities.

The choice of location can also have an impact on the company's image, as it can affect the perception that customers, suppliers and investors have of the company. For example, a company based in a village or economically weak region may be perceived as less dynamic than a company based in an economically prosperous city or region.

It is therefore important to take the time to consider the choice of a company's headquarters or domicile and to seek professional advice to avoid this common mistake.

Contact us to start your initial consultation now. We would be delighted to get to know you and define the next steps in your project to establish a company in Switzerland.

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